Results of the Competitiveness Council of Ministers, Brussels, 22nd September 2003

Internal Market Strategy (JT)

Internal Market Commissioner Frits Bolkestein stated that he wished he could be more upbeat about the current state of the Internal Market, but regretted that “I can't when key indicators measuring its performance are all starting to flash red. The growth of intra-EU trade has slowed to a crawl. Intra-EU trade in services as a share of GDP is less today than it was 10 years ago. Foreign direct investment has taken an even bigger dip. Member States seem to be turning increasingly to their domestic economies.”

“Price convergence”, he continued, “which was rapid immediately after the launch of the Internal Market in 1993, has - like trade integration - come to a halt. And that is not because we have run out of room for convergence: there are still considerable price differences in the EU for the same goods and services. Such differences cannot be explained by differences in labour costs, transport or geography.”

“This is all bad news for our competitiveness”, he noted. “We should not forget that the Internal Market Strategy is all about competitiveness. How can we best restart trade and market integration? We need to do a lot more than just adopting conclusions today. We need to commit ourselves to making some changes. First, we need much faster adoption of key proposals. I have said it before, I will say it again.”

“Second, we need to become much more pro-active when it comes to removing obstacles to the free movement of goods and services. What is stopping Member States from starting to remove now obstacles that they know are unjustified and which our proposals are targeting? We cannot afford to take four or five years before our initiatives come to fruition.”

“Third, commitments need to be honoured. I am very concerned by the recent backsliding on transposition of Internal Market directives. As many as eight Member States are running a transposition deficit that is more than double the target of 1.5% or less set by the Head of State and Government. Only Denmark and Spain, who deserve to be congratulated, now meet this target. The EU average is now 2.8%, up from 1.8% in May last year.”

“Finally”, he concluded, “I frankly see little chance of the Competitiveness Council succeeding in getting more attention paid to competitiveness by other Council formations if we neither adopt important proposals that are on our own table, nor implement conscientiously the laws we do manage to adopt. I have said it before, but never with greater conviction: it is time for decisive action both at Community and Member States level if we are to see the Internal Market making the contribution to competitiveness that we know it can.”

The Council adopted the following conclusions:

recalling the Conclusions of the Brussels European Council of March 2003, which call for a strong new push to improve the Internal Market in view of enlargement and to boost competitiveness across the Union consistent with the Lisbon objectives, and which identify the Internal Market Strategy (2003-2006) as the basis for future action;

recognising the Internal Market Strategy's importance as a key component of an integrated strategy for competitiveness and endorsing its general thrust;

welcomes the benefits which the Internal Market has already delivered over the past ten years;

notes, however, that many obstacles still need to be removed and Europe's communications and transport systems further integrated in order to facilitate the free movement of people, goods and services within the Internal Market;

underlines that a robust Internal Market is essential for European business to compete successfully on global markets and for our economies to continue to grow and generate the wealth necessary to maintain and enhance the quality of life of our citizens, including through the provision of high quality and safe products;

agrees on the need to speed up the adoption and implementation of outstanding Internal Market measures which are critical to improving Europe's competitiveness;

calls on the Commission to make further proposals to implement the Strategy, including in the main priority areas for action, accompanied by adequate impact assessments with a clear focus on competitiveness;

recalls in this context the importance of a balance between the different instruments available for strengthening the Internal Market;

agrees that, while the Commission will continue to fulfil its role as guardian of the Treaties, in order to derive maximum benefits from the Internal Market in an enlarged Union, Member States will have to share responsibility for its functioning, ensuring timely and effective implementation and enforcement of the rules, solving problems where possible pragmatically, and refraining from adopting national provisions that hinder free movement and distort competition;

undertakes to review progress on the basis of the Implementation Report to be produced by the Commission in January 2004, and to take swift remedial action in any areas where progress is lagging behind.

Community Patent (JT)

Commissioner Bolkestein recalled to Ministers “how pleased we all were with the common political approach adopted on 3rd March, which was the long-awaited breakthrough that would lead to rapid finalisation of the Community Patent Regulation. The remaining details would be 'more or less' technical. But here we are, more than six months after the political agreement, and our officials are still struggling with issues concerning translations and compulsory licensing! The Commission is of course willing to show some flexibility to reach a compromise but so should all Member States! We should be able to fill the remaining gaps without further delay.

The Council took note of a progress report on the state of play regarding the draft Regulation creating a Community Patent. The Council confirmed the importance it attaches to concluding work on all aspects of the Community patent system at a short delay.

Therefore, the Council invited the Committee of Member States' Permanent Representatives (COREPER) to examine pending questions in order to be in a position of reaching a political agreement on the draft Regulation and on the modification of the European Patent Convention at its November meeting.

Action Plan on company law and corporate governance (JT)

The Council adopted the following conclusions:

The Council:

Welcomesthe presentation of an Action Plan of the EU Commission to modernise company law and enhance corporate governance within the European Union, consistently with the Council recommendations based on the conclusions of the June 2002 Seville European Council and of the March 2003 Brussels European Council and on the final report of the High Level Group of Company Law Experts.

Acknowledges the importance of the Action Plan to the creation of a regulatory framework consistent with the completion of the Internal Market and to enhance the competitiveness and efficiency of European businesses.

Considers the Action Plan to be an important element of establishing a transparent and sound capital market in the enlarged Union.

Emphasises the need to modernise and simplify the regulatory framework, especially relating to capital maintenance and alteration.

Emphasisesthe urgent need to design adequate solutions to remove the obstacles to and constraints on mobility and on the cross-border restructuring of European Union businesses, as well as on the cross-border exercise of shareholders' rights, by fostering the use of information and communications technologies.

Emphasisesthe need to strengthen at the same time corporate governance of companies which publicly raise capital and supportsthe adoption of a common approach to this matter that will enhance transparency, strengthen shareholders' rights and modernise the principles governing the board of directors.

Highlightsat the same time the need to ensure that any solutions proposed take fully into account the governance models and differences in ownership structures that exist in different Member States.

Welcomesthe proposed balance between the use of legislative instruments, in the form of framework Directives, where appropriate, and non-legislative instruments, in compliance with the principles of subsidiarity and proportionality.

Endorsesthe Commission's recognition of the importance of expert and public consultation as an integral part of the development of EU level company law and corporate governance and takes noteof the Commission's intention to set up an open informal discussion forum on systems of corporate governance within the European Union, fully respecting the role and the prerogatives of the Community's institutions.

Deemsit necessary to reflect further on the real need to introduce new legal forms of enterprises at EU level in addition to the instruments already lying before the Parliament and the Council.

Agreement on free movement of EU citizens within the territory of the Member States (PP)

The Competitiveness Council reached political agreement on a modified Commission proposal for a Directive on the right of EU citizens and their families to freely move and reside within the territory of the Union. The basic concept of the proposal is that Union citizens should be able to move between Member States on similar terms as nationals of a Member State moving around or changing their place of residence in their own country.

Antonio Vitorino, European Commissioner for Justice and Home Affairs, congratulating Member States on the result achieved, said that “this text represents an ambitious text, in line with the expectation put by our citizens in the works of the Convention on the future of the Union. In the last four years the Union has achieved a great deal in the areas of security and justice. The new Directive will represent an essential step in ensuring that we can say the same as concerns our citizens' freedom.”

The main content of the new measures agreed upon at the 22nd September Council is as follows:

to simplify the conditions and administrative formalities associated with the exercise, by citizens of the Union and members of their families, of the right of free movement and residence in the Member States, notably by eliminating for EU citizens the need to obtain a residence card [replaced by registration in the population register of the place of residence];

to introduce a permanent right of residence, which is no longer subject to any conditions, after five years of uninterrupted residence in the host Member State;

to define more clearly the situation of family members and make it easier for them to exercise their right of free movement and residence. [In particular, family members who are nationals of third countries also enjoy greater legal protection, for example in the event of the death of the Union citizen on whom they depend, or the dissolution of the marriage under certain circumstances.]

to restrict the scope for refusing or terminating residence on grounds of public policy, public security and public health and ensure strong protection against expulsion for minors and people having resided for a long period of time on the territory of the host Member State.

The Commission attaches great importance to this proposal, which represents a crucial initiative for facilitating the free movement of persons, one of the most visible advantages of a united Europe for individual citizens.

The proposal represents an important step in the definition of a strong concept of citizenship of the Union, a concept which has been given a considerable boost by the outcome of the Convention on the future of the Union.

This Directive, once adopted, has the potential to make an enormous difference for the good of the millions of EU citizens who current reside abroad and the many more who will want to do so in the future.

It will also encourage mobility of EU citizens across the Union, which in return will have a positive impact on the competitiveness and growth of European economies.

The Common Position, once finalised, will have to be transmitted to the European Parliament for its second reading with a view to adoption before the end of the current legislature.

Directive on Pedestrian Protection (PH)

The Council confirmed its agreement on the Directive of the European Parliament and of the Council relating to the protection of pedestrians and other vulnerable road users in the event of a collision with a motor vehicle and amending Directive 70/156/EEC. The formal adoption of the Directive will take place as soon as possible at a forthcoming Council meeting in order to allow enough lead time for Member States to implement it.

Chemicals legislation results of the public consultation (PH)

Commissioner Erkki Liikanen presented the results of the public Internet consultation on the new chemicals strategy REACH (Registration, Evaluation, and Authorisation of Chemicals). He pointed out that the internet consultation lasted for a period of 8 weeks and that the Commission had received some 6000 responses, spread between industry, workers, non governmental organisations (NGOs), individuals and public authorities and agencies. He further underlined that the internal process of identifying the key points of concern and possible solutions to the main problems, e.g. balancing the concerns for health and the environment against cost and competitiveness issues, had not been easy.

All Member States were grateful to the Commission for holding the public Internet consultation saying that they were efficiently run and considered a very useful and transparent means of consultation.

Most Member States called on the Commission to come forward with a full impact assessment.

Finally, the Council took note of the Commission's information following the Internet consultation and welcomed the Commission's intention, in the short-term, to come forward with a proposal by November.

G10 Medicines European-based pharmaceutical industry (PH)

Commissioner Erkki Liikanen highlighted the importance of maintaining the balance between competitiveness and health and the respect for national competence but the need for Member States to be actively involved in G10 implementation for there to be long-term results.

The Competitiveness Council stressed in its conclusions entitled “Reinforcing the competitiveness of the European based pharmaceutical industry” the role to be played by Member States in the implementation of the actions proposed by the Commission, in particular as regards benchmarking by providing appropriate information on legislative and non-legislative measures that could have an impact on the pharmaceutical sector.

The Commission was invited to organise an EU-wide reflection together with all interested Member States and stakeholders on different approaches to pricing and reimbursement for pharmaceutical products, related to the assessment of their added therapeutic value, exploring the scope of more competitive and dynamic market mechanisms, aimed at ensuring the equitable and rapid access of patients throughout the EU to medicines, in order to improve the integration of the European market in this field, while respecting Member States' competencies and the differences in their health care systems.

Finally, the Commission was invited to report regularly to the Council, on the state of competitiveness of the pharmaceutical sector on the basis of the results of the benchmarking exercises on competitiveness and public health and of information supplied by Member States.

Biotechnology - Implementation of Strategy + Roadmap (PH)

The Council adopted a set of conclusions on the initiative “Life sciences and biotechnology a strategy for Europe. The Council welcomed the Commission's first progress report on the implementation of the European biotechnology strategy and agreed with the broad lines of its analysis.

The Council:

stressed the need for significant efforts to be made to move from the conceptional and planning stage to the implementation of the biotechnology strategy and of the “roadmap” in order to contribute effectively to the achievement of the EU competitiveness objectives set by the Lisbon European Council;

underlined the need to encourage overall coherence in policy making and to envisage, at EU level, the development of appropriate means for closer co-operation among Member States together with the Commission, in implementing the biotechnology strategy, in particular, for improving conditions for access for finance for biotechnology companies.

The Commission was invited to assess the progress achieved in this area in its next report along with the results expected from the Conference on life sciences and biotechnology to be held in Rome on 21-22 November, as a source of possible further input in the process of implementing the Action Plan and the “roadmap”.

Consumer affairs: European Contract Law Action Plan (TM)

Ministers adopted a Resolution on the EU's European Contract Law Action Plan broadly supporting the strategy set out in the Commission's Communication of 12 February 2003 (see IP/03/232). Contract law underpins all Internal Market transactions in Europe whether it be businesses selling products or services to other businesses, or purchases made by consumers. EU laws such as the Sale of Consumer Goods Directive already harmonise specific aspects of Member States' contract laws. The Action Plan outlines a set of measures to make this interaction between EU and national laws more coherent and overcome problems for the smooth functioning of the Internal Market. The Resolution supports the goals of the Action Plan and emphasises that Member States want to b e very closely involved in the important process that it initiates.